Worries about financial health of hedge funds and a near $70 crude hit stocks
A near $70 crude and worries about the health of hedge funds slammed US stocks today (Friday, 22 June, 2007). Renewed concerns about the impact of the subprime mortgage market prompted a major sell-off among US stocks. The annual rebalancing of the Russell indexes exacerbated the broad-based move to the downside.
Of all the 10 sectors finishing lower, Financials led the way. Selling remained the name of the game going into the closing bell. Growing fears following the subprime fallout at Bear Stearns led Investment Banks as today's worst performing S&P industry group.
All but one of 30 Dow stocks closed lower for the day. Twenty-two Dow stocks had losses of greater than 1%. The Dow Jones Industrials lost a whopping 185.58 points to close at 13360.26. Tech heavy Nasdaq shed 28 points to close at 2588.96. S&P 500 closed lower by 19.63 points at 1,502.56.
Du-Pont was the sole Dow winner. Exxon Mobil, Microsoft, Intel and Caterpillar were the major Dow laggards today.
The Dow is down 1.9% for the week. The S&P 500 is down 2% and the Nasdaq shed 1.4%.
But the widely anticipated IPO of The Blackstone Group got a warm reception amid the sell-off in today’s market. Its stock opened up about 18% at $36.45 and ended with a 13% gain. The offering raised $4.13 billion by pricing at the top of its estimated range as the sixth-richest IPO in U.S. history.
Microsoft’s 2% fall pushes Tech to the wall
When market opened in the morning, stocks opened lower across the board as rising interest rates continued to act as an overhang as the 10-year yield at 5.19% remained a concern for the economic outlook.
The market saw a brief afternoon reprieve after Bear Stearns said that all liquidations of assets from its two struggling hedge funds, which are tied to the distressed subprime mortgage market, would be put on hold.
Of all the 10 languishing sectors down more than 1% on the session, the biggest three disappointments were Financials, Technology and Health Care.
The benchmark 10-year bond reversed early losses to finish up 12/32 at 95 3/32, while its yield dropped to 5.141%.
Technology was a weak spot for the broader market for the entire day. A 1.7% decline in Microsoft made the situation even more difficult. Chip maker PMC-Sierra plunged 3.8% following reports that it will be removed from the S&P 500 next Friday.
Crude just below $70 on Nigeria strike
Crude oil futures strengthened today after the government of Nigeria failed to reach an agreement with unions to end a three-day-old general strike in the largest oil-producing country in Africa.
As per latest reports, yesterday, oil unions withdrew workers from export terminals in a bid to halt shipments. Nigerian unions increased pressure on the new government in the third day of the strike, protesting increases in taxes and fuel prices. Nigeria, a member of OPEC produced about 2.3 million barrels per day of crude oil in 2006.
Crude-oil futures for light sweet crude for August delivery closed at $69.14/barrel (higher by $0.49/barrel or 0.71%) on the New York Mercantile Exchange. Prices rose 0.9% this week and are down 2.4% from a year ago.
Trading volumes showed 2.6 billion shares on the New York Stock Exchange and 2.7 billion shares traded on the Nasdaq stock market. Declining issues topped gainers by 3 to 1 on the NYSE and by 20 to 9 on the Nasdaq.
The Federal Reserve will meet on Wednesday and Thursday next week to discuss the economy and interest rates. Among earnings reports expected, Oracle, RIMM and General Mills are the big names.